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by Sven Parplies, Euro on Sunday
D.Germany’s top corporations are spreading optimism: More than half of the DAX members want to increase the dividend for 2020 despite the raging pandemic. The total should even increase slightly compared to the previous year. € uro am Sonntag expects a distribution of 33.8 billion euros for the 30 index members. That would be around one percent more than for 2019. However, the corporations are far from the record – before the pandemic, the DAX corporations paid over 38 billion.
The current dividend season should pave the way back to normal. The hot phase began last Wednesday with the Daimler Annual General Meeting. Volkswagen concludes in July. The fact that the world is still in crisis cannot be overlooked: For the second year in a row, the meetings will be held over the Internet. So shareholders have to do without the buffet, which is popular with many. On the other hand, the business figures of the past year are heavy in the stomach, at least for some companies.
The hard facts: The net profit attributable to the shareholders of all 30 DAX companies fell by almost 50 percent in 2020 according to the calculation of € uro on Sunday. Even if you exclude Bayer – the group posted a loss of more than ten billion euros, among other things due to special expenses from the glyphosate litigation – the DAX’s profit drop of over 30 percent. After all, almost every third company was able to increase its net profit in the past year.
The pandemic is an acid test for corporate dividend policies. As in the 2008/09 financial crisis, many disappointed. Almost half of the current DAX members have cut their payout at least once or even completely canceled it since the beginning of the pandemic. Many already made the cut last year, with the distribution for 2019. A dividend cut is a quick and easy way to protect the balance sheet. For shareholders, on the other hand, the turning point can be painful when money is an integral part of personal financial planning.
But which companies in the DAX can you really rely on for dividends? The exclusive analysis of € uro am Sonntag shows that the selection is manageable. Only SAP, Fresenius and Fresenius Medical Care have continuously increased their payouts over the past ten years. With these three, however, the dividend yield is only around two percent. Investors who want above-average dividend yields, a history that is as clean as possible and good prospects will find what they are looking for here: In the following we present our favorites.
The giant in the DAX
Allianz remains the largest dividend payer in the DAX. Almost four billion euros are to be transferred to shareholders in May. As in the previous year, there are 9.60 euros for each share. Ten years ago, the insurance company still paid 4.50 euros. The distribution per share has more than doubled within a decade. The last cut was made for the year 2008: In the midst of the global financial crisis, the consolidated balance sheet was burdened by high losses at the then subsidiary Dresdner Bank.
The insurance group has survived the pandemic well so far: Although net profit fell by 14 percent in 2020. But there remained a surplus of 6.8 billion. The payout ratio will thus rise above the targeted 50 percent mark. In an exceptional year, however, this is justifiable. Analysts assume that net profit will rise to more than eight billion euros as early as 2021. That would mean ten euros per share as a dividend. In addition, the share buyback program, which was stopped during the pandemic, could be resumed in the second half of the year. The dividend yield on the share is more than half a percentage point above the level of industry rival Munich Re. Allianz remains the top dividend stock in the DAX.
Positive from Ludwigshafen
The world’s largest chemical company, BASF, expects a strong business recovery for the current year: Adjusted operating profit (EBIT) is expected to climb to 4.1 to 5.0 billion euros. That would be an increase of 39 percent at the top. The signals from Ludwigshafen were already clearly positive in the final quarter of 2020. Adjusted operating profit rose by almost a third, more than expected by stockbrokers.
As a dividend stock, BASF has earned an excellent reputation with ten increases in a row. For the past year, however, the distribution is expected to stagnate at EUR 3.30 per share. And this despite the fact that CEO Martin Brudermüller had set the goal of increasing the payment every year. Now all that is said is that BASF can “continue to pay high dividends up front”. Analysts expect the dividend for the current and coming year will at best increase slightly, alsoh because the group has to invest heavily in climate protection, for example. The operational business should pick up independently of this. The cyclical recovery of the economy, cost reductions and portfolio shifts promise leverage.
It is possible that BASF will reach or exceed the upper end of its forecast. The share offers a dividend yield of over four and a half percent and thus belongs to the top of the DAX.
Good luck messengers
2020 was really exhausting for the couriers of Deutsche Post: 1.6 billion parcels were delivered in the home market alone, 200 million more than in the previous year. Because many shops were closed during the pandemic, consumers shop on the Internet, and in many cases the goods were delivered by Deutsche Post. The express business, in which deliveries are made on time, is particularly lucrative for the group.
The record year 2020 is only likely to be a stopover for the Rhinelander: The operating profit (EBIT) is expected to increase from 4.8 billion euros to more than six billion euros by 2023. The volume is being driven by the growing e-commerce that digitalization at the same time reduces costs. 40 to 60 percent of the profit should go to the shareholders. For 2020, the Post plans to pay 1.35 euros per share, 20 cents more than in 2019. This corresponds to a payout ratio of 56 percent. Analysts calculate that the dividend of the logistics giant will increase by an average of six to seven percent in the coming years. Deutsche Post shares remain a growth stock with a dividend yieldot via DAX-Niveau.
Housing allowance for shareholders
The share of the Bochum property group Vonovia has been traded on the stock exchange since summer 2013. The dividend history is already remarkable: every year he has increased his distribution, on average by 14 percent. For the past year there should be 1.69 euros per share. That boils down to a dividend yield of around three percent. 70 percent of the FFO – this key figure stands for the operating profit of a real estate company – is to be distributed.
Vonovia owns 416,000 apartments in Germany, Sweden and Austria. Another 74,000 are managed. Low interest rates and growing cities are driving up property prices and increasing the value of the stock. In addition, the Bochum company is expanding its portfolio through acquisitions and new buildings. With increasing size, cost advantages in maintenance can be achieved.
The business of the real estate industry is relatively stable in economic crises because tenants do not want to risk losing their apartment. In 2020, Vonovia’s FFO rose by almost eleven percent. It would be problematic if real estate prices in Europe fell significantly, interest rates rose sharply or the state regulated the market more closely. However, analysts see Vonovia on track: FFO is likely to continue to rise and the dividend will follow suit. Analysts assume that the dividend will grow by around five percent on an annual average. So the flawless dividend streak should continue.
FUCHS PETROLUB has a remarkable series to show for: the lubricant manufacturer from Mannheim has not lowered its dividend for 28 years; it has been rising continuously for 19 years. For 2020, owners of the privileges listed in the MDAX will receive 99 cents per share, two cents more than in the previous year. Analysts expect that es further up in small steps Geht.
Fuchs’ business held up well last year with a three percent decline in operating profit. However, the recovery is likely to be slowed by rising raw material costs. The group, whose most important customers also include the automotive industry, now also has oils and lubricants for the requirements of alternative drives in electric and hybrid vehicles in its portfolio. At 75 percent, the equity ratio is at a high level.
Due to the recent price weakness, the dividend yield is on a level of just under two and a half percentent risen. The payout ratio is 62 percent, which is an acceptable level. Given the economic environment, the stock is turnaround speculation with a dividend as an extra.
The DWS Group has a significantly higher dividend yield than FUCHS. The asset manager from Frankfurt, which is listed in the SDAX, is benefiting from the good mood on the stock markets. The assets under management recently rose to the record volume of 793 billion. Adjusted pre-tax profit rose slightly by three percent last year.
The dividend for 2020 is to be 1.81 euros per share after the annual general meeting in June. At the current market value, this corresponds to a return of around five percent. DWS has only been listed on the stock exchange since March 2018 and has always increased its payout since then. 65 to 75 percent, a very large part of the profit, should go to the shareholders. Via the dividend, the share has the character of a reliable cash supplier.
Even around eight percent The freenet share currently yields a dividend yield. The telecommunications service provider wants to transfer its shareholders 1.50 euros in dividends and a special payment of 15 cents for the past financial year, for a total of 1.65 euros. In addition, the MDAX-listed company is buying back its own shares. In the pandemic, however, the dividend for 2019 was trimmed to the minimum rate of four cents.
In principle, freenet aims to distribute at least 80 percent of the free cash flow. Since the Büdelsdorf-based company operates in a fiercely competitive market, the potential for growth is likely to be limited. But even with a constant payment of 1.50 euros, the dividend yield would still be above average at more than seven percent.
Germany’s top corporations already cut dividends significantly last year, i.e. in the early phase of the pandemic. As a result, the pressure is no longer so great. This year, the total dividend in the DAX will even increase slightly.
The biggest payers
Allianz will distribute almost four billion euros to its shareholders this year. The insurance group is thus defending its position as the largest dividend payer in the DAX. Far behind are BASF, Deutsche Telekom and Siemens, who each pay out around three billion.
That’s how dividend works
Many companies give their shareholders a share of the annual profit through a distribution. If you want to collect the dividend, you have to buy the share no later than the day of the company’s general meeting and have it in your custody account by the end of that day. The money is paid no later than the third business day following the general meeting. However, the tax authorities hold their hands on shareholders who are taxable in Germany. A total of 26.375 percent of capital gains tax and solidarity surcharge are deducted, and church tax may be added. The taxes are automatically paid to the tax office. The saver lump sum is taken into account. With an exemption order from the custodian bank, investors can collect 801 euros tax-free per year, couples taxed together 1,602 euros.
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Image sources: iStock, B. Stefanov / Shutterstock.com, Finanz Verlag, Finanz Verlag